Hello I am new to BiggerPockets and hope to become a frequent and active user in order to develop more knowledge in RE. After doing some research, I became interested in wholesaling RE, since I know this may be the best route for me right now. However, I have a few concerns I hope some of you experts can assist me with. From my knowledge you go out and find good deals for investors. In order for you to establish some income you try and earn the difference between the deal you and the seller/owner made vs what you will be offering to the investor. My question is, how is it that the investor doesn't just skip you (the middle man) and work with the seller theirselves? When you and the seller seal the deal, are you obligated to purchase the home since there is a contract involved? What does this contract contain? I really do appreciate any type of feedback!!! Marivel Valdez
Great Question. Seems like you got the basic part of Wholesaling down. I would research on how to do wholesaling, so you know exactly what it is. There are some great articles on the site about that. We just wrote a blog last week regarding the basics:
To Answer Your question, "Why doesn't the investor skip you?" That is a great question and I get asked a lot. The truth is, Wholesaling is simple, but it's not EASY. It takes a lot of Hard work and constant marketing to get really good deals. And to be really good at it, it's a full time gig. So a fix-n-flipper or a buy-n-hold investor, who has a lot of their time tied up doing rehabs and rentals, don't have a lot of time to do all of the marketing, and talking to 100's of motivated sellers in order to find the deals that a wholesaler can find.
I sometimes put it like this: Everyone probably goes to the Grocery Store to buy Groceries. Well the grocery store bought those groceries from a wholesaler grocery provider. So why don't you just skip the grocery store, and just find the wholesale grocery provider, and buy directly from them. Because it would take a lot of time, work, and energy to try and contact them, and figure all of that out... It would be easier to just go to the Grocery store and still buy at a good price and It's CONVENIENT. That's why we do it.
This is what a wholesaler does for an investor. They prove a GREAT DEAL (Because they have already done all of the negotiating, and work behind the scene to get that GREAT DEAL, and the investor wants to buy from you because it's CONVENIENT.
I hope that answers your question.
If you tie up a property, You can have an out "Clause" or just don't put too much earnest money down and be prepared to lose it if you can't sell it. But I think this is not the best strategy as it gives you a bad Rep if you continuously back out of deals... I personally would be prepared to close if you tie up a property. You might look for a transactional lender that can help you close if you have to.
Thanks and God Bless,
Why doesn't the investor go around you? Presumably, you have tied up the deal with a signed contract. The buyer is you "and/or assigns" which gives you the option of bringing in a partner if you don't have the ability to close the deal yourself, OR you can assign it to a third party for an assignment fee. You can have a contingency in the contract such as "subject to partner;s approval" Your "partner " is someone else you are bringing into the deal or the potential assignee. You would have, let's say a week to get his approval.
If he/she approves it, you have a deal. if you can't find someone in that time period, you can cancel the deal. If I were you, I would read as many articles and books on wholesaling as possible. Join your local REIA and get educated. The REIA would have fellow investors who have "been there and done that" and will gladly share their experience with you.
That is such a great example. Thank you and @Rick Stein for your feedback I sincerely appreciate it. I obviously have tons of work to do. Once I begin my search for good deals out here, I am sure I will encounter more questions. You guys are only destined for greatest. Sharing your wisdom is gold to me. THANK YOU!!!
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